LinkedIn rockets skyward in initial public offering

The months-in-the making debate about whether Silicon Valley is back in a tech-stock bubble took the national stage Thursday, as LinkedIn -- the social networking site for professionals -- posted the industry's most jaw-dropping initial public offering since Google's (GOOG).

Earlier this week, LinkedIn had been priced to debut as low as $32 a share. Amid hefty investor demand, management hiked that number to $45. The stock opened on the New York Stock Exchange Thursday morning at a stunning $83; by mid-morning, the Mountain View startup briefly hit $120.

Things returned to earth somewhat by the closing bell, when the stock -- trading under the symbol LNKD -- finished at $94.25. But considering that was more than double its initial price, it remained one of the tech industry's best-ever IPOs and seems certain to set the table for even bigger debuts by other social-networking companies like Facebook and Zynga.

"If anybody thinks that the tech investing sector didn't change today, they're absolutely crazy," said Lee Simmons, editor of IPO research service Hoover's. "Today is going to be a benchmark of how these stocks enter the market in the future."

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LinkedIn had been Silicon Valley's most anticipated offering since Google's in 2004. Its meteoric rise reflected pent-up demand for hot social-networking companies, whose stock up to now has only been available to the well-heeled.

Mutual funds, pension funds and other major money managers began snapping up the stock Wednesday; such investors got the first chance to buy most of the IPO's 7.84 million shares because stock in such offerings is typically sold to investment bankers' top customers.

Many observers questioned how the company, which offers a forum for business people to swap contact information and résumés, could be worth almost 40 times its 2010 revenues of $243 million — especially given that it has said it expects to lose money next year as it ramps up growth. Most of LinkedIn's revenue comes from fees it charges for recruiters, as well as from online ads.

Former AOL Time Warner chairman Richard Parsons told CNBC that LinkedIn's surge "is like a movie I've seen before." Parsons, now chairman of Citigroup, told the network: "People get wildly excited about these Internet-based stocks. I have my doubts."

But Tony Zingale, chief executive of another large social-media startup, Jive Software, was among those who argued that this is no repeat of the Internet bubble of a decade ago, when companies went public on little more than hype.

"I think this whole social wave represents the new way," said Zingale. His Palo Alto company is backed by one of the same venture capital firms as LinkedIn, Sequoia Capital.

"It's the new way to live, as evidenced by Facebook and Twitter," he said. "And as evidenced by this morning, it's clearly the new way to professionally network. With 100 million users, LinkedIn's numbers speak for themselves."

"I think we're gonna see a lot of companies get funded that maybe shouldn't, but that's the nature of the valley," said Zingale, who previously was chief of Mercury Interactive. "For every LinkedIn hit, there's four or five that don't make it."

CEO Jeff Weiner turned aside questions about a potential bubble.

"We are very comfortable with where we priced," he told Bloomberg Television. "I wouldn't read too much into any one day of trading. We're in this for the long-term."

Fears of a bubble apparently haven't penetrated the secondary markets that have emerged to trade shares in private companies. New York-based secondary exchange NYPPEX released an estimate that people who've bought LinkedIn through private channels in the last year have seen those investments appreciate three to five times after the IPO.

Facebook, the cream of the social crop, is currently valued at $79 billion on private exchange SharesPost, a number higher than the market caps of Hewlett-Packard (HPQ) and Disney.

That figure seems certain to rise, given that Facebook's user base and estimated revenues are much higher than LinkedIn's.

For now, LinkedIn's $8.9 billion market value is the highest for a U.S. Internet company taking its first bow on Wall Street since Google went public with a market capitalization above $23 billion. Google made its debut at $85 and within days had risen above $100; on Thursday, it closed at $531.

It's anyone's guess as to whether social stocks will have that kind of staying power. But LinkedIn founder Reid Hoffman and the company's main venture capital backers seem to be betting on a long rise for the stock: Hoffman, an early employee at PayPal who's now a partner at Menlo Park venture capital Greylock Partners, sold only a small fraction of his shares Thursday, retaining ownership of 20 percent of the company.

LinkedIn also has granted its underwriters a 30-day option to buy up to an additional 1,176,000 shares to meet demand.

The company has said it plans to use the money raised from Thursday's offering for operations and possibly to buy other companies.

The Associated Press contributed to this report. Contact Peter Delevett at 408-271-3638. Follow him at Twitter.com/mercwiretap.